Oil has surrendered gains after rising in early trading as investors weighed whether an unprecedented deal by the world’s biggest producers to cut output would would be enough to steady a market pummeled by the coronavirus.
Futures in London are trading sideways after the OPEC+ alliance agreed to a plan to slash production by 9.7 million barrels a day starting in May. The group reached a deal following days of intense negotiations after Mexico declined to endorse the original agreement reached Thursday.
The U.S., Brazil and Canada will contribute an additional 3.7 million barrels in nominal production cuts as their output declines, and other Group of 20 nations will cut 1.3 million more.
The G-20 numbers don’t represent real voluntary cuts but rather the impact that low prices have already had on output, and they would need months, or perhaps more than a year, to take effect.
Saudi Aramco reduced pricing for all its grades to Asia, signaling the state company’s intention to defend sales in its biggest market even while paring output.
“The global market remains very oversupplied, and Aramco is still prepared to fight for its market share,” said Ole Sloth Hansen, head of commodities strategy at Saxo Bank A/S in Copenhagen.
Brent for June delivery was 15 cents higher at $31.63 a barrel on the ICE Futures Europe exchange as of 2:45 p.m. in Dubai. The contract jumped as much as 8%, or $2.51, earlier in the day. It lost 7.7% last week and has fallen from $66 at the end of last year.
West Texas Intermediate for May delivery was trading 1.1% higher at $23.01 a barrel on the New York Mercantile Exchange, after dropping almost 20% last week.
Futures markets were closed on Friday, so Monday’s pricing reflects the change in values since the end of trading on Thursday, before the G-20 meeting had started.
